It is commonly believed that corporate debts can only be purchased by financial institutions or legal entities. However, this is not the case. Even ordinary individuals can acquire these debts. Few are aware that earning money from debts is accessible to anyone willing to take on the risk.
This investment avenue is gaining popularity among investors who are ready to take risks. Such investments can yield substantial profits, with returns potentially reaching hundreds of percent. Importantly, all actions taken by the investor are completely legal, provided they adhere to certain guidelines.
Understanding the intricacies of this scheme can be elucidated by an experienced market player and founder of "Oil Resource Group" – Sergey Tereshkin. You can explore the entrepreneur's activities in detail on the website: www.sergeytereshkin.ru
What is Accounts Receivable?
Accounts receivable refers to the debts of third-party organizations and individuals owed to a specific enterprise. In the absence of repayment guarantees, these debts are written off, resulting in losses for the company. A large amount of accounts receivable increases the risk of bankruptcy, while simultaneously diminishing the company's attractiveness to potential investors and credit institutions.
To avoid such issues, a company must recover at least part of the funds. To facilitate this, debts are sold at auction. The selling price may be tens or even hundreds of times lower than the nominal value. For instance, by investing 1,000 rubles, one might ultimately receive 10,000 rubles.
Types of Accounts Receivable
Accounts receivable has repayment terms and can be divided into several categories based on various parameters:
- Normal. Repayment occurs within the agreed timeframe.
- Overdue. Repayment deadlines have passed, and prospects for recovery are uncertain.
- Doubtful. Various factors may hinder repayment, such as the absence of contractual obligations.
- Hopeless. The statute of limitations has expired, or the debtor is undergoing bankruptcy proceedings. The statute of limitations is three years; beyond this period, any recovery effort is futile, and the claim will be dismissed.
The types of receivables are interconnected.
Earning Money from Accounts Receivable
How can an average individual make money from accounts receivable? Upon purchasing a lot in relevant auctions, the buyer acquires the right to demand payment. This procedure is regulated by civil and tax codes.
The transfer of rights to claim a debt often arises from the debtor's difficult financial situation or low chances of repayment. In such cases, it is much easier to sell the debt than to make futile attempts to negotiate with the creditor.
The third party that receives the rights can earn income from the difference between the cost of purchasing the debt and the funds received subsequently, or in the form of interest from the transaction.
Accounts receivable can be acquired at public auctions, held electronically and accessible to any citizen of the country. Currently, there are many such platforms available, offering plenty of intriguing opportunities. For instance, one could buy a debt owed by a major corporation due to its failure to meet contractual obligations for various reasons.
There are several methods for profiting from accounts receivable:
- Resale. The lot can be resold at auction for a higher price, with profit arising from the difference between the purchase and selling price.
- Lawsuit. One can reclaim the funds from the debtor by initiating legal proceedings. It is essential to draft the claim accurately, adhering to legal norms and deadlines. In many cases, an agreement can be reached with the creditor even before the first court hearing.
- Debt repayment. Few are aware that accounts receivable can serve as a payment source. They belong to the first-tier category and are equivalent to securities and cash. This means that a foreign debt can help settle one’s own.
All methods possess their own strengths and weaknesses. However, they share a common characteristic – the process of recovering investments can be prolonged and requires active involvement.
Risks
Investing in accounts receivable falls into the high-risk category. Therefore, before deciding to invest, one should carefully consider all factors involved and investigate the debtor company thoroughly.
To assess risks, a series of steps should be undertaken:
- Evaluate the market value of the debt. It is important to understand beforehand what the debt is realistically worth. This involves estimating the likely percentage of funds that can be recovered.
- Comparison. Potential investors should compare the offered debt with others available in the auction.
- Analyze the financial condition of the creditor. This requires reviewing accounting documents, papers confirming the existence of the debt and the terms of its repayment, real estate on the balance sheet, and other assets.
Not everyone is willing to invest the time to do this. For this reason and others, the market remains relatively free and nearly without competition. So why not take advantage of this opportunity?
Funds can be recovered in various ways. This can be done independently or by consulting specialized companies that have established strategies for collecting debts from legal entities. Such organizations will likely require a certain percentage as a fee, but this is much more convenient than facing potential pitfalls alone.
Sergey Tereshkin recommends starting with a small amount of accounts receivable and gradually increasing the investment as experience grows. However, with increased investment comes a corresponding rise in the risk of non-recovery.
It is important to note that at public auctions, if there are no buyers, the cost of the lot gradually decreases. As a result, it may be possible to acquire it for a minimal price. The subsequent success and thus the income generated depend on the investor’s activity, their ability to analyze data and situations, as well as their negotiation skills and determination.
